The average retirement income in the UK can vary greatly depending on several factors, including an individual's contributions to a pension plan, their type of plan, eligibility for state pension and their savings, as well as inflation and individual life expectancy.
According to the Pensions and Lifetime Savings Association (PLSA), the annual amount required to achieve a ‘moderate’ standard of living in retirement is £23,300 for a single person (opens a new window), or £34,000 for a couple. This is enough for reasonable financial security and flexibility, including a two-week holiday in Europe each year, and eating out a few times a month.
As of 2021, however, around half of single employees weren’t on track to achieve the moderate standard (opens a new window). This number is also likely to have increased more recently, as the rising cost-of-living forces individuals to tighten their budgets and prioritise short-term costs.
According to the Department for Work and Pensions (DWP), the number of newly enrolled employees who opted out of their workplace pension increased to 10.4% in August 2022 (opens a new window), up from 7.6% in January 2020.
Making a difference through financial education in the workplace
It's important for individuals to think carefully about whether they are saving enough for their retirement. By supporting employees with regards to financial education, employers can make a difference.
Primarily, the impact of having a clear strategy around financial wellbeing can improve financial literacy, helping employees to better understand their finances and make informed decisions about their money, reducing the risk of financial stress.
This, in turn, enables better planning and decision-making, giving employees the tools to plan for the future, set financial goals, and make informed decisions about their money.
In the case of pensions, this allows them to secure a more comfortable income upon retirement and gives them greater freedom to live their best life, while reducing the risk of poverty in old age.
Employees aren’t the only ones who stand to gain from financial education, however. From an employer’s perspective, the business case for providing financial education is strong.
By reducing stress and improving financial literacy, employees are more likely to experience improved wellbeing - improving employee health, reducing absenteeism, and increasing employee engagement at work.
Here are 8 top tips for employers:
Provide clear and concise information – ensure that employees understand the basics of their pension plan and the benefits of participating. Use simple language and visual aids to help employees grasp complex concepts
Encourage employees to pay as much as they can – if you offer a tiered contribution structure, make sure employees know how to make the most of the contribution you offer
Use salary exchange – if it’s right for your demographics, it’s a more tax-efficient way for employees to save
Communicate regularly – keep employees informed about their pension plan and provide updates on their progress. This can be done through regular newsletters, employee meetings, or through your flexible benefits or online portals
Provide financial education – offer educational resources and workshops to help employees make informed decisions about their pensions
Encourage planning – help employees plan for retirement by providing tools and resources to estimate their future income and expenses
Personalise the experience – provide personalised communications and services to help employees feel more engaged and invested in their pension plan
Foster a culture of saving – encourage a culture of saving and financial planning to help employees prioritise their pensions.
For further information, please contact,
Saba Haran, VP Benefits and Pensions
Lockton People Solutions
